Improving conditions see surge in Sheffield office market

Office take-up in Sheffield has almost surpassed the whole of 2015 in just six months, although there has been a significant fall in Grade A deals according to our Q2 2015 Sheffield Office Market Pulse.

Double the amount of deals

The first half of 2015 has already seen more than double the amount of deals transacted in Sheffield compared to last year, although deal size remains relatively low with more than three quarters below 5,000 sq ft.

The letting of the 50,000 sq ft Old Post Office in Fitzalan Square to Sheffield Halam University by LSH has been the largest deal of the year but excluding that, take-up still remains a third ahead of the same period in 2014.

Significant confidence returning

Tom Shelton, Senior Surveyor at LSH’s Sheffield office, said the figures showed there was significant confidence returning to the market, which it was hoped could lead to further much-needed Grade A development to help ease the city’s supply problem.

He said: “The Sheffield office market is enjoying a strong year but good quality Grade A space remains in short supply, which continues to be a barrier to attracting major new occupiers to the city.

Further speculative development necessary

“The addition of 80,000 sq ft at 3 St Paul’s Place later this year will be very welcome but further speculative development is necessary to really unlock Sheffield’s full potential as it looks to reap the benefits of wider investment around the Northern Powerhouse project and an increase in devolved powers to the regions.”

Office take-up in city centre and out of town markets reached 170,980 sq ft in Q2, taking the total so far this year to 286,657 sq ft compared to 2014’s full year total of 289,176 sq ft.

Grade B rents increasing

The majority of the transactions were for Grade B space with just 16 per cent Grade A compare to 70 per cent for the first six months of 2014. The demand for Grade B space has pushed rents up to £13.50 per sq ft while headline rents for Grade A space remain around £22 per sq ft, although they are likely to increase once to £23 per sq ft once 3 St Paul’s Place comes to market.

The city also saw its first investor activity for almost 18 months with the acquisition of 3 Carbrook Triangle at a net yield of 6.9 per cent but the continuing lack of prime stock is likely limit any further activity in the immediate future according to the report.